Prudential Financial (NYSE:PRU), not to be confused with Prudential plc (NYSE:PUK) of the U.K., is one of the largest life insurers in the world. Negative overall sentiment on any financial company has sent its stock toward its lowest levels over the past year. An appealing valuation and decent growth prospects overseas bode well for future shareholder returns.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Recent Developments
On May 22, 2012, Prudential held its annual investor day and committed to raising its return on equity to between 13 and 14% by 2013. Implicit in this assumption is growth in its investment portfolio and stock market returns of 8% over the next couple of years. International growth, especially in Japan and parts of Asia, is expected to be the key growth driver. Cost cutting and share buybacks are also expected to make some positive impacts on per-share profits over the next couple of years.

SEE: A Breakdown Of Stock Buybacks

European Fears
Unlike U.K. rivals Prudential plc or Aviva (NYSE:AV), Prudential has minimal business exposure to Europe. As of the end of 2011, its primary exposure stemmed from its investment portfolio, which held roughly $17 billion in European sovereign government bonds, financial institutions and other entities. Though large in absolute levels, it is quite muted in the context of Prudential's investment portfolio of $355 billion and total asset base of $625 billion.

SEE: Investing In Sovereign Bonds

Outlook and Valuation
For all of 2012, analysts project total revenue growth of 9% and total revenues of nearly $43 billion. The consensus earnings estimate currently stands at $6.55 and is expected to rise nearly 19% to $7.76 for 2013. Based off book value of $74.35, this represents return on equity levels of 8.9 and 10.5% and forward P/E of seven and six, respectively.

SEE: 5 Must-Have Metrics For Value Investors

The Bottom Line
Prudential operates primarily in the U.S. and Japan, which are the two largest life insurance markets. According to a study provided in its investor day presentation, the market share of the global life insurance market came in at 27 and 24%, respectively, with the rest of Asia (excluding Japan) the next largest at 23%.

Japan is expected to be a future growth driver. Prudential is a leader domestically and now the third largest player in Japan, with a share of around 10.4%. Other rivals include Sumitomo Mitsui Financial Group Inc. (NYSE:SMFG) and even Sony (NYSE:SNE). Overall, the combination of decent international growth prospects, prospects for improved shareholder profits and a compellingly low valuation, bode well for future shareholder returns.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  3. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  4. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  5. Stock Analysis

    Tech Stocks Vs. Financial Stocks in 2016

    Consider the arguments for allocating more of your investment portfolio to either the technology sector or the financial sector for 2016.
  6. Stock Analysis

    The Top 5 Financial Penny Stocks for 2016 (CPSS, ASRV)

    Learn about some of the most promising penny stocks in the financial services sector that investors can consider adding to their portfolio for 2016.
  7. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  8. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  9. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
  10. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
  1. How can insurance companies find out about DUIs and DWIs?

    An insurance company can find out about driving under the influence (DUI) or driving while intoxicated (DWI) charges against ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
Trading Center